Debt Consolidators

In this publication on debt consolidators, we're going to talk about the various types of specialized services offered to clients.  For example, we'll briefly discuss consolidators specializing in student loans, Christian / nonprofit consolidators, and private lending institutions.  We will also talk about alternatives to debt consolidation loans.

The Role of a Debt Consolidator

Debt consolidators provide a useful and important service to several segments of the American population.  For those individuals that have a lot of credit card debt, or find themselves with many loans to manage, looking for a good debt consolidator makes a lot of sense.

Consumers need to recognize the attributes of a good service provider, or they could wind up with a consolidation loan that is not in their best interests.

Advertisements Promising Debt Help

If you look carefully through your postal service mail or emails, then you probably noticed a surge in the number of offers you get from advertisers promising debt help.  Typically, these advertisements talk about providing you with a consolidation loan, credit repair, or help negotiating with collection agencies.

If the deal sounds too good to be true, then you probably don't understand all of the details behind the offer.  When evaluating an offer of debt help, there are just a few things that you need to look out for:

• Fees - these can be loan origination fees, service fees, and application fees.  Remember that the objective is to get out of debt, not to spend money on fees that only help the consolidation service company.
• Credit Repair - there are only two services that a credit repair agency can provide to you when it comes to credit repair:  financial education, and help finding errors on your credit report.  If the report has an existing error, then the credit repair service can walk you through the process to get the report corrected.
• Loan Terms - when evaluating a loan, you need to look at the interest rate or annual percentage rate offered, as well as term on the loan.  The interest rate is the cost of borrowing, and the term is the length of time it takes to pay off the loan.  When comparing offers, look carefully at these two items.

Student Loan Debt Consolidators

If you have several types of student loans outstanding, then you may be able to work out a better deal by working with a student loan debt consolidator.  The Department of Education runs a Direct Consolidation loan program that can help former students to better manage their loans, and sometimes find lower interest rates on a consolidated loan.

You can find out more information on this program by taking a look at our article on Student Loan Consolidation, or by visiting the Department of Education's student loan consolidation center.

Nonprofit Debt Consolidators

There are many nonprofit debt consolidators that have the resources to work with individuals, and help them to develop a long-term debt management plan (DMP).  These services are comprehensive, and usually involve help such as debt counseling, social counseling, credit repair, and budgeting.  All of these services have the ultimate goal of educating individuals that are having trouble paying their bills each month.

The hope is that these consolidators will not only help the individuals with their immediate need of finding a loan, but also make sure they are equipped with the knowledge that will help them stay debt-free in the future.  They do this by understanding why they are in debt, and developing a realistic plan to help them stay out of debt.

Christian Debt Consolidators

You can find a nonprofit debt consolidator by looking for a statement in their promotional materials that mentions they are a 501 (c) (3) not-for-profit corporation.  Some of these organizations call themselves Christian Debt Consolidators, and we have more information on this type of service provider in our article on Christian Debt Consolidation.

Private Debt Consolidators

Finally, you can work with private debt consolidators to find a consolidation loan.  This group can be split into two subsets of providers. The first includes more traditional lenders such as banks and credit unions.  The types of consolidation loans these lenders offer include home equity loans, home equity lines of credit, home refinancing, and personal loans.  Usually the transaction is limited to the loan itself, and debt educational services are not offered to the potential customer.

The final group of debt consolidators includes professionals that specialize in finding debt consolidation loans, and providing educational services to consumers.  The offerings of this group are identical to those of the nonprofit debt consolidators, except that you should expect professional help, service, and advice from these firms.

Unlike the nonprofit organizations, you will be paying a premium for their professional advice, and you should expect a higher level of service.  Before working with any debt consolidator, make sure you understand the value-added services they will provide, and study the terms and conditions of any contract carefully.

Alternatives to Debt Consolidators

While the focus of this article is on debt consolidators, you should know that alternatives do exist.  For example, you can work with a traditional lender to take out a home equity loan.  Home equity loans usually have low fees and low interest rates; however the term of these loans is usually 15 years or more.

You can also "cash out," and refinance your home.  The new mortgage would include outstanding loans.  Once again, the interest rates on these loans are low, but the term or length of the loan is relatively long.

Finally, you can consider taking out a personal loan instead of working with debt consolidators.  In some instances, you may find better loan terms with a private loan than a consolidation loan.  It pays to comparison shop.

Debt Consolidation Calculators

If you'd like to see just what a private or consolidation loan might cost you each month, we have several online calculators that can be helpful when evaluating your loan options, including:

• Consolidation Loan Calculator - allows you to bundle your existing debt into a consolidated loan, and see what the monthly payments would be for that loan - regardless of the service used.
• Credit Card Payoff Calculator - if you have a lot of credit card debt, and want to see what it might take to pay it off, this calculator can help.
• Student Loan Payoff Calculator - similar to the credit card calculator, this tool helps you figure out what it might take to pay off your student loans.
• Debt Reduction Calculator - another debt tool that helps you to build a plan to reduce your debt.
• Refinance a Mortgage - if you have an existing mortgage, and are thinking about using refinancing as an option, this calculator can help with the decision-making process.

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